Knowing the differences and similarities between sales order vs purchase order is important for any manufacturing business. In any manufacturing business, handling sales and purchase orders correctly is important. It guarantees everything runs smoothly and customers get what they want on time. This blog post will discuss the differences between these two important documents. It will help you understand how they work in production, buying goods, and getting products to customers.
What is a Sales Order?
A sales order is a document that a service provider/company sends to a customer. It lists the products or services the customer wants to buy, along with their prices. Usually, it's given when the buyer pays for the services, but it can also be given for credit purchases.
What is a Purchase Order?
A purchase order is a document sent by a buyer to a seller. It tells the seller what the buyer wants to purchase. It outlines the items, quantity, prices, and credit terms for the purchase. The PO becomes a legally valid contract when the vendor accepts it.
Difference between Sales Order and Purchase Order
Here is a table showing the major differences between sales orders and purchase orders:
| Criteria | Purchase Order | Sales Order |
|---|---|---|
| Meaning | A purchase order is a document that tells a supplier what goods to deliver and under what terms. | A sales order is a document that tells a customer what goods or services they will receive. |
| Type of Document | A purchase order is used externally, sent from buyer to supplier. | A sales order is an internal document made by the seller's company. |
| Importance | A purchase order helps buyers get specific goods and services from suppliers. | A sales order helps sellers agree to sell specific goods and services to customers. |
| Who Prepares | Buyers create purchase orders and send them to suppliers. | Suppliers issue sales orders to buyers before delivering products. |
| Effect of Acceptance | A purchase order forms a contract between the buyer and supplier. | A sales order confirms the sale of goods listed in the purchase order. |
| Generation | Purchase orders come after accepting the supplier's quote or proposal. | Sales orders are made after receiving a purchase order. |
| Objective | Purchase orders authorize the sale of goods and services. | Sales orders confirm the sale of goods and services. |
Similarities Between Sales Order and Purchase Order
Now that we have discussed the differences between sales order vs purchase order, let’s see what the things both these documents have in common:
- Both documents become legal agreements once the receiving party accepts them.
- Both SOs and POs are commonly used in business-to-business (B2B) deals, like manufacturing or selling in bulk.
- Both documents have the details of the goods and services involved in the deal.
- They contain the same information about the products.
- In EDI (Electronic Data Interchange) standards, they're both called ORDERS.
How do both Sales Order and Purchase Order work together?
Purchase orders and sales orders work together to finish transactions. Below are some pointers that will help you understand the same in more detail:
- A customer sends a purchase order to a vendor. This document explains the terms for a possible sale.
- Once the vendor gets the purchase order, they send a sales order to the customer. This confirms that the vendor agrees to the terms of the purchase order.
- The purchasing department uses the purchase order to begin getting the items needed.
- The sales order begins the process of fulfilling the customer's order.
- Once the order is delivered, the transaction is completed through the final invoice.
Software Tools for Managing Sales Order and Purchase Order
Many sales & purchase software are available to help businesses easily manage their sales and purchase orders. These tools include inventory management software, order management systems (OMS), order tracking systems, inventory control system, and software for purchase order management.
- Inventory management software helps monitor inventory levels, organize tasks, and track orders and deliveries.
- OMS offers a single platform to manage orders across all sales channels, while order tracking systems help monitor the progress of orders from placement to delivery.
- Inventory control systems automate sales order fulfillment and track inventory levels.
- On the other hand, software for purchase order management allows for creating and monitoring purchase orders from requisition to delivery. This helps maintain detailed records of all orders for easy access.
Transform Your Sales and Purchase Order Process With TranZact
TranZact is a digital inventory management tool designed for small manufacturing businesses, helping them upgrade to digital operations. TranZact offers a user-friendly sales & purchase software solution to automate your sales and purchase order processes. With TranZact, you can manage the overall workflow, from creating and managing orders to tracking deliveries and payments. Its easy-to-use interface and customized features make it easy to fit your specific business needs. Say goodbye to manual paperwork and lengthy data entry!
FAQs on Sales Order vs Purchase Order
1. What is the primary purpose of a sales order?
The primary purpose of a sales order is to record a customer's request for goods or services from a seller, listing the items, quantities, prices, and terms of the sale.
2. What is the primary purpose of a purchase order?
The primary purpose of a purchase order is to record a buyer's request for goods or services from a supplier, listing the items, quantities, prices, and terms agreed upon.
3. Is a sales order the same as a purchase order?
No, they are not the same. Sales orders are issued by the seller to the buyer, while purchase orders are issued by the buyer to the seller.
4. What is the difference between sales and purchases?
Sales refer to goods or services sold by a seller to a buyer, whereas purchases refer to goods or services bought by a buyer from a seller.
5. How to create a sales order?
To create a sales order, write down the customer's order details, including items, quantities, prices, and terms, and issue it to the customer for confirmation.
6. How to create a purchase order?
To create a purchase order, you must record the buyer's order details, including items, quantities, prices, and terms, and issue them to the supplier for processing.
7. What is sales and purchase software?
Sales & purchase software are tools designed to assist businesses in managing their sales and purchase processes smoothly. They commonly offer features such as order management, inventory tracking, invoicing, and reporting to automate operations and improve productivity.
